Auto Insurance for Car Accidents

You should carry the state minimum liability car insurance for accidents to cover damages you cause. If you have an expensive or financed car, you should carry collision car insurance for accidents.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Jan 17, 2021

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Here's what you need to know...

  • You should always have insurance coverage in case you’re ever in an accident
  • If you only have liability, your policy will not cover any damages you’ve incurred
  • If you have a very expensive car, or if your car is financed, you need to carry more than your state’s minimums for auto insurance

Car insurance following a car accident is something that almost every adult in the United States will have to deal with at some point in their lives.

It can be confusing to some, simply because of the sheer volume of information and the number of car insurance companies providing coverage. However, it doesn’t need to be if drivers are willing to put forth the effort to fully investigate their options.

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Making sure you have appropriate car insurance coverage requires that you know the laws in your state. At the very least, you’ll need to meet the minimum state requirements to be in compliance.

You also may choose to add extra coverage not required by law if it’s suitable to your circumstances.

The only way to know these things is to start investigating and asking questions.

Seek the advice of friends and family, colleagues, and insurance company representatives to get answers to some of your insurance questions.

Why States Require Car Accident Insurance


When car ownership first came into being at the turn of 20th century, car insurance was not a common thing.

The first policy was written in the late 1800’s for a wealthy business person who owned one of the earliest automobiles, but that was the exception to the rule.

Auto insurance companies didn’t really begin to prosper until the 1920’s due to the fact that horses and carriages were still the primary mode of transportation.

As more and more people purchased their own personal vehicles, traffic accidents began to rise proportionally. One-by-one, state governments began mandating car accident insurance as a means of making sure that medical expenses and property damage would be paid for.

Today, with millions of vehicles driving on American roads, it’s more important than ever for car owners to make sure they have accident insurance.

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Individual State Mandates

Each state has its own regulations when it comes to how much insurance you’re required to have.

In New York State, for example, drivers are required by law to carry a minimum of $25,000 for bodily injury, $50,000 in liability coverage, and $10,000 for property damage.

As a general rule, the standard way to express state requirements is through a six-digit representation — for example, 25/50/10 in New York.

It’s important to make a distinction about the middle number, referred to as liability in the previous example, because of the different way it’s classified from state-to-state.

New York requires drivers to carry a certain amount of coverage to pay for underinsured/uninsured drivers who might be involved in an accident; that coverage is included in the liability portion.

Other states may not require such coverage, which would result in a lower liability number.

It’s illegal to drive in any state without insurance. Most states require insurance to be provided by a company licensed to do business in that state.

There are a handful of states that allow drivers to waive coverage by a licensed insurance company if they prefer to be self-insured.

Such a scenario is rare because the individual must be in a strong enough financial position that he can demonstrate the ability to pay car accident claims out of pocket.

What Car Accident Insurance Covers

A man stands in front of his damaged car.

The minimum required coverage in your state only pays for a limited number of things.

The bodily injury portion will pay the medical expenses incurred by you or your passengers as a result of an accident; the liability portion covers uninsured/underinsured drivers as well as any expenses you may incur as the one responsible for the crash.

Property damage pays for things like fences and parked cars on any land that suffers damages from an accident.

State minimums do not cover things like fire and theft, broken glass, and collision costs.

All of those things are extras which are added to your policy at your discretion.

If you own an old junker, for example, you may not be interested in such coverage. But if you own a new or car, especially one with an outstanding loan, you’re going to want these extra things.

If your car is exceptionally valuable, you may want a comprehensive policy that will cover you under any circumstances.

Just be prepared to pay higher insurance premiums based on the value of your car and its overall replacement cost.

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